Skip to main content
6:00 am
you mentioned the lower corporate tax rate at which a bad rate. how would that go toward addressing a bias? >> i am not sure what the optimal corporate rate is. we have to look at what the rate has fallen to in other countries around the globe that are a major trading partner.
6:01 am
that would suggest that something of a rate around 25% would be about the top rate which would include the state and local rate which adds about five points to the rates. lots of times companies find that equity capital is less expensive than dead even taking deductions fore deduct chin agreeing down the corporate rate would go along with for bringing down the bias. >> do you think galore rate -- should we also eliminate the taxation of dividends? as a measure of improving the system? >> i think there has to be a connection between the two. to the extent to have a high
6:02 am
corporate rate, you need a lower rate on dividends and a vice versa. if you have too high a rate of tax on dividends, you will give companies a disincentive to pay dividends and that has been a problem. >> isn't the double taxation? >> yes. >> ok, the mortgage interest deduction, did have a role to play -- did it have a role to play in the underwriting standards or should we do something about that? can you elaborate on what tax incentives could do to reduce the cost of renting? >> the code currently provides several benefits for rental housing to try and increase the supply of rental housing and reduce rents to moderate to low
6:03 am
income individuals. there are provisions in section 42 to provide the tax credit to expand the supply of rental housing to qualify lower income families. under section 142, states may issue tax-exempt bonds to help finance that lower cost. multifamily housing is targeted at lower income and there are provisions in the income tax code. i don't think i am fully addressing your question, sir. >> i have run out of time. >> may be the chairman will grant an extra 32nd since i miss spend your time. >> [laughter] thank you, mr. chairman. >> we have some of votes that will start in the senate rather quickly. there are no senators at this moment.
6:04 am
continue whenu the vote occurs. is senator carper here? no, he isn't. >> in the house, we have done a good job on the ways and means committee of conducting many hearings in an effort to examine how we might revamp the code. it is important with knowledge today that unless the presidential candidates next year take up the issue in earnest that it will be very hard for us even having accumulated a great deal of evidence as to how the code might be altered to, in fact, make it happen. after we come up with competing products or one product, the presidential candidate should
6:05 am
exist -- addressed extensive hearings. we have heard this question before but i want to go back to it. one of the witnesses testified that foreign-owned multinationals in the united states have a competitive advantage over u.s.-based corporation with respect to certain u.s. investments. the witness stated further that the tax advantage afforded to inbound investors rises because of their ability to erode the u.s. tax base to payments such as earnings or interest stripping payments. maybe we might hear from the professor to hear what your thoughts are on whether foreign-owned u.s. subsidiary corporations engaged in earnings striplings on their u.s. investments and if they have a competitive advantage over u.s.-incorporations and should some of the tax rules be modified in order to prevent this competitive disadvantage
6:06 am
for u.s.-owned corporations? . >> i will defer to the professor on that. >> it is striking that the profitability of foreign multinationals in the u.s. is low. relative to american firms. one explanation for that is a loss of earnings stripping. there are alternative explanations. it is hard to make money in america vs. american multinational firms. if a base erosion is the problem, you have to ask the question -- are they able to do some american firms are not able to do? i would have thought that their subject to the same regulations and rules that american-held nationals are. i understand the source of concern which is slow process -- profitability in the u.s. and
6:07 am
the possibility that they are stripping their earnings. what i am less convinced of is the degree to which that represents earnings stripping or something else. it is a puzzle why they would be more capable in some sense that american firms. >> there are two ways to look at that. >> there certainly is in tax policy. >> it shows that american multinationals are also very good at moving profits offshore through things like transfer pricing. >> thank you.
6:08 am
on the rental side, you have rental honors that have the ability to not only take advantage of the mortgage interest deduction but a series of other deductions that in theory would reduce it taken away their ability to keep rents lower, meaning it through the tax code you took away deductions from rental housing owners, there would have to increase their rents. that is just a comment. i have a question on the business side for all of you. there was a report that actually stated that the debt to equity issue does not really apply to owners of businesses that are passed through entities. the preferential treatment with respect to the tax code on financing debt. we have heard in this committee,
6:09 am
half of american businesses are set up as pass through entities. the administration has suggested or changing the way that pass entities are taxed on the corporate side. wouldn't that have a negative affect on those pass through entities today and continue to exasperate the debt to equity issue to the tax code? >> i think the main point that you are raising is that the corporate income tax at its simplest level is the tax on the return of income to the equity owners. it is an extra tax. it is a double taxation. if he were to make, by whatever
6:10 am
criteria, entities that are currently pass through entities subject to a second level of tax and attacks were on the return to equity owners, it would increase the relative burden on equity returns and would favor debt financing by those entities. we argued that is the case in corporations. >> that is exactly my question. >> i agree with that. i think it would be better to move in the opposite direction of integrating the corporate system with the individual system rather than push people into the corporate system. >> there are distortions from debt vs. equity in the pass through context. the interest deductions you can generate by financing the debt, those deductions can be moved
6:11 am
around to a large extent to one partner or another depending which partner has the higher tax rate. it does not always match up with the underlying economics. my preference would be to move toward a system where pass throughs - or what are currently pass throughs and c-corps are treated the same per. >> thank you. >> thanks for holding the hearing and thanks to all of you for being here. a number of you had mentioned the need to do tax reform and the idea of lowering the rate and broadening the base which i assume suggests you believe we should pay for any tax reform and it should be revenue
6:12 am
neutral. is that a good assumption? >> i think it is important for the country to size its budget so that there is a better match up between ravenous and spending. -- between revenues and spending. we have made decisions in recent history on the basis of a revenue constraint. that has led to bad policies. >> revenue neutral? >> because of the time, if you contended that revenue neutral tax reform is the way we should be going? >> if you took on a broader tax reform including a switch away from an income tax to a vat tax you have the option of being revenue neutral and settings does not heard investment. >> on lowering the rate and
6:13 am
broadening the base, if you do away with all the tax expenditures, it gets you to about 28%. what i have been during most recently that deals with this debt ceiling debate -- and i hear from people for my district -- 100% disabled vietnam veteran said they did that get to social security check he will live in his car. they say this will be devastating for agriculture and it will take decades to recover from loss of not doing the debt ceiling. can you tell us what the priority would be for paying our debts if we don't pass the debt ceiling? >> i'm afraid that is not within
6:14 am
my area of expertise. >> from your experience, it would be the treasury? >> no, treasury is on the tax collection side instead of paying out. >> can anyone tell us what the fiscal impact would be if the debt ceiling is not raised? how many years would it take for us to recover from the hit even if it is a few days or a week or a month without raising the debt ceiling. i understand this a fiscal consequence that will haunt us forever. >> we don't know exactly. we should not do it. i hope we don't do it. i think it would be bad for the economy at this point in time. >> thank you very much. discrepancies, i will be recognizing two republicans for one a democrat at this point. >> let me first express my
6:15 am
support for the fundamental tax reform rather than try to do this piecemeal because of the distortions that will create if we do that. in your testimony, you mentioned the adjustments to the deductibility of interest expense that need to be considered within further moves toward extending capital investments. in recent years, we have seen a number of efforts and laws enacted to spur economic activity by increasing accelerated appreciation provisions and moving toward more generous expensing for certain types of assets. at the same time, we have the interest remaining as a deductible expense. talk a little about the distortions that could be created. could we see a-affected tax rates and other distortions? i would like all of you to comment on that.
6:16 am
>> yes, we would see-tax rates. -- we would see negated tax rates. >> any time you allow borrowing to borrow on an investment, you have created an opportunity and incentive to engage in tax arbitrage. tax laws are very clever. they will try to design structures to take the fullest advantage. >> i would echo what has been said. that is the reason why one should move not toward environmental efforts but think about this in a systematic way so we avoid these kind of situations. >> i agree, also.
6:17 am
>> thank you. >> mr. buchanan -- >> i want to thank all the panelists. we're talking about the debt ceiling and getting people back to work. indian farmer we find ourselves in today, do you think that raising taxes on individuals or small businesses makes sense in terms of what is going on today? to any of you feel that makes sense as a policy decision in washington? >> certainly on a near-term basis, we need to be careful with anything we do that would raise taxes. one of the most important things we can do for the country is to get things so that for the long term we know where we will stand. we learned in 2001 that permanent changes have the most affect. about individuals and small businesses.
6:18 am
does it make sense to raise taxes on individuals and small businesses? >> to the degree that we want to take a shot at fixing our structural problems, we will have to raise taxes on someone at some point. there are short run consequences doing it right now. >> i have been in business and third -- for 30 years. remember what happened then and we ended up with a bank crisis and move forward and we find ourselves in this area which -- with a lot of leverage. if you don't have a viable financial institutions, you put everything at risk. what is happening in florida and around the country, many banks are leveraged 10-1. because that have been taking a hit to equity, they have had to
6:19 am
shrink the banks. you've got to have sound financial institutions. we get in this trap every 10 or 15 years. do you agree that we have to take a look of the viability long-term of financial institutions in terms of as it relates to small businesses? >> absolutely, if you go back to when we had a free -- real free market system around 100 years ago, banks of that time routinely had 30% equity. that was relative to their total assets and they had a buffer against losses. when you had a downturn, they did not have to capitalize their
6:20 am
loans. they did not squeeze out small businesses. we have to recognize that regulation has encouraged and allow banks to have too little capital to long. if we're going to have big shots in the economy, you need to discourage debt and encourage equity including big banks and small banks. >> thank you for being part of this historic hearing. this comes at an historic time for the nation. we received letters from more than 400 ceo's about the pending potential of the fault -- of default on the nation's debt. they said that even a technical -- technical default in this
6:21 am
case would have catastrophic events. this happened in 1979 even under the well and tens of congress for it was late resulting in interest rates that plague the country for the next 10 years. given what is happening around the globe, with moody's downgrading ireland again today, what is your advice to the congress in terms of acting and giving the deadlines that secretary of the treasury tim geithner has outlined? >> my advice would be simple and be the same advice as christie and the lifeguard would give the united states. you need to expend the debt ceiling and you cannot play games with something this serious. world financial markets are much more fragile than you would like to believe. >> i would echo that.
6:22 am
what is worth considering is exactly why. one is a technical default. it can become a broader manifestation of a system that appears broken to the rest of the world and that is where we run into significant problems. i have less of a position on how we fix that but it is important that this deadline is not ignored. >> if i might just follow quickly -- is this not the equivalent of knowing about lehman brothers with all the other nations that we see in jeopardy and knowing what we know, isn't it essential that we act now? >> it is essential that we act now. i would caution has to be parallel with private-sector actors because the government is
6:23 am
very special. >> well taken. >> it is a very serious issue. >> the situation in europe right now is very bad and getting worse. the bureau's own does not have control of the situation in italy or spain or board problem. it is essential that the united states remains a beacon of clarity otherwise there will be consequences all around the world. >> is the united states reputation as a government entity globally and domestically at stake? >> yes. >> thank you for holding this hearing today. we have heard about home mortgages and homeownership being a priority in our society and in the tax code. could you reflect on the effectiveness of the mortgage interest deduction? how effective has that been and and the alternatives might propose? >> i think it has had an impact
6:24 am
in putting more people into houses. that is good. but if you were to take a step back and try to think about designing housing policy, to is hard to conceive that using an interest deduction, and mortgage interest deduction, would be the right way to accomplish that goal particularly one that is not capped at a certain number. if you allow it all on second homes on super expensive homes does not make a whole lot of sense to me if the goal is to get lower class and middle-class people into houses. >> would you propose an alternative in our public policy in terms of encouraging home ownership? >> sure, in the short run, limiting the mortgage interest deduction would be beneficial.
6:25 am
in terms of what the other policy goals are, i guess i am not quite sure what you are getting at. i think we have a lot of people in houses, probably more than we need to. there are people that move around a lot with benefits from an equivalence of renters. >> there is a bed of a puzzle given how large this preference is. it has not been easy to find evidence the effect on behavior. maybe we like it and we have to ask why we like it. one reason is we like it because home ownership is good and creates good citizens and good people and that is what we believe. we also believe the construction sector is important. in the cyclical recovery, that is something you want to help. i think it is important to nail
6:26 am
down which of those we really believe. we have had high levels of home watershed. it is not clear that more home ownership is good. there are chunks of the population with which renting is a good thing to do. >> we are not direct the -- directly encouraging home ownership. we are encouraging leveraging. if you wanted to revenue neutral, we could reduce the mortgage deduction to encourage people to buy new homes if that's what you wanted to do. we encourage households to take on an believe in an enormous amount of leverage. many of them did not understand the downside risk that they now see in parts of the country. >> i yield back. >> i will now recognize senate carper. >> this is a big room.
6:27 am
it looks bigger than the senate. the detroit tigers are in first place in the american league central and that is good to see. i like to see carl levin's big brother. to our witnesses, thank you for joining us. one of the main reasons that tax reform has become necessary is that the corporation of new tax breaks we add to the tax code it seems like every year. i am told that if you add up the cost of these tax exemptions, the cost of the next 10 years is $15 trillion over the next decade. that is more than the federal government will spend on social security or on national defense. some of these tax incentives are
6:28 am
for individuals and summer for corporations. other policies are good and some are not. many tax preferences are inefficiently designed and many lose more revenue than necessary. with those thoughts in mind, debt vs. equity is something that needs to be examined closely. one of the keys to tax reform in 1986 when i served in the house was that congress working with the relative administration cleaned up some of the tax preferences in exchange for lower rates. ord like to ask each of our witnesses to take a couple seconds -- i would like to ask each of our witnesses which one policy change would do more than any other that you can think of
6:29 am
to reduce the bias in favor of debt and the current -- in the current tax code? which one policy change would do more than any other you can think of to reduce the bias in favor dead in our current tax code? >> greater integration of the corporate tax system. -- and individual tax system. >> thank you. >> i agree. i think equalizing the treatment of debt and equity but i will take a second to add that 1986 was like the holy grail in the tax academy. it was an amazing achievement that broaden the base and lowered the rates. one of the keys of that was not focusing only on one thing at a time but focusing on the system as a whole. and tackling many different tax expenditures at the same time.
6:30 am
i think that was part of the magic of that reform. >> thank you. >> 1 version of the integration proposal would be the comprehensive business tax. >> thank you. >> i suggest that you tax excess of leverage in the financial sector. you would injured those -- -- he would introduce some deductibility with the treatment of debt and equity. >> that is interesting, thank you. anybody else? all right. and as my time expired? >> it has. >> it was greater [laughter] it was great to see all of you. thank you for those direct dancers. >> ms. jenkins is recognized. >> in general, since 1945,
6:31 am
household debt has steadily increased. the last couple of years, there has been some decrease in the combined mortgage and consumer debt for households but the total combined debt for 2010 is approximately 120% of disposable income. that has rapidly increased since tax reform back in 1986. which eliminated the deduction for personal credit. my question for the panel -- is this level of debt sustainable? why has household debt increased when no deduction is available for interest on personal credit? what is the appropriate private debt ratio for households and how long do think it will take for us to achieve that? >> thank you.
6:32 am
you recited the statistics we provided to the members. this shows there is not an obvious link between our tax policy related to household debt and what has been going on in the household market. remember that it is a reasonable and sound economic matter for households to incur debt. and be a matter of when you are young and you are starting out, you purchase a home so you carry a large debt load which you gradually pay down. as you pay down the mortgage. you may borrow to purchase automobiles or furnished the home to buy other durable goods. that is part of what we use the jargon in the pamphlet that the economists like of the life cycle of consumption.
6:33 am
that does not answer why has the overall debt load on the house hold increased. i don't have a good take on that. i will defer to of the other panelists. >> i think i should defer to the economist. >> ok. >> as one factor, which is the housing bubble, as realistic prices were going up, people were able to increase household debt with larger and larger mortgages to finance current consumption. with the housing bubble burst, we are observing people deleveraging in significant ways. >> i think you are right to put your finger on what is a long- term process of leverage and will be a long-term process of
6:34 am
deleveraging as we move forward. the reasons can be cultural and they can be economic. one thing to highlight in the tax code is the absence of a consumption tax or a value added tax for the presence of an income-tax which disfavors savings. that is a piece of that puzzle. it is hard to say how much. it is another reason to think hard about whether the tax we have now is the right one. >> thank you. is it fair to say that the main take away from this hearing could be that a way to bring the equity and debt issue into focus is to devalue the value of the debt deduction in the code by simplifying the code and lowering the rate?
6:35 am
and make it less valuable? also i think one of you said there was some hybrid debt instruments that were distorting the system. could you identify with those hybrid debt instruments are? >> sure, on the first question -- the goal is neutrality between debt and equity broadly speaking. you can either do that by limiting interest deductibility or you could do it by allowing a deduction for corporate equity. either those approaches would
6:36 am
achieve tax to neutrality. some of the hybrid instruments -- they'll have trade names that the investment bank's come up with. i think of things like feline pride was one of the first and these are instruments that are part of debt and part equity. on the balance sheet or for bank regulatory purposes, they look like they are equities but they are deductibles. they are referred on wall street as tax-deductible preferred stock. they are not preferred stock. there ongoing obligations by the bank to those who pay on these securities. in the financial crisis, they cannot skip those payments like you could with stock. that added to the crisis. >> could you live of the tax preference on those specific instruments?
6:37 am
>> it is hard because all you're doing is a movethe line. you can move along in a little bit but you will see a lot of activity that shifts to wherever you have moved the line. texas neutrality would be the better solution. -- tax neutrality would be the better solution. >> i would underscore the point about futility of line drawing in the context of managers and financial engineers who can capitalize on that. >> thank you. >> thank you all for your testimony. in the three minutes i have, let me see if i can focus a bit -- and now we have been talking about the treatment of debt and equity for corporations and how
6:38 am
we move forward with the tax code to try to reform our system of taxation and make this more competitive. i think most by setter focused -- the thinge mostyes that our focus to these days are focused on the debt issue. perhaps you can give an answer to this question. does increasing the debt ceiling have anything to do with reducing future spending by the federal government? >> i am not an expert on overall fiscal decisions of the united states. the members of congress vote on outlays and revenues. >> in terms of future spending, spending next year or 10 years, if we vote in congress to increase the debt ceiling limit today or before august 2, does
6:39 am
that have anything to do with what we will spend directly in 2020? >> as a simple statutory matter, the two issues are separate. >> ok, i know you have had a chance to speak a bit about this and i know -- let me ask mr. johnson a question -- should revenues be part of the debt limit discussion? as we start to discuss how we move forward in dealing with our deficits and our national debt, if you want to have an approach that results this issue of our national debt, should rabin is the part of that conversation? >> in any situation where fiscal adjustment is required, i would suggest that you look at both revenue and expenditures. yes, i would definitely include
6:40 am
revenues in the discussion. >> if we are able to resolve the large deficit and the large national debt in a way that is comprehensive long-term, does that help the private sector? our companies tried to do business domestically or abroad? >> the best thing you can do is to have a fiscal framework that is completely credible. that will bring down long-term interest rates and will encourage investment and will boost growth. >> in the alternative, if we take the country to the brink and if we don't have a solution by august 2, what happens in the eyes of the business community? >> we don't know what happens but we don't want to find out. other countries that have tried to play this kind of games with the financial markets end up being burned. in the 1970's, the technical
6:41 am
default had an impact. why would you want to take that risk? m >>r. berg is recognized. >> thank you. i have been sitting here listening to a lot of analogies. one analogy is between personal household and federal government debt. i think this is an analogy. people loaded up on individual debt because they made money. inflation was driving values up and people were able to make that leveraged investment and get a high return. i think our u.s. debt has soared out of control because it has been too easy to simply borrow money and not make some of the difficult decisions that need to be made. i think that if we don't take this issue serious and we don't look long term and have a serious rebound for the country, that the private sector and financial markets will say washington killed us. the fundamental question we have
6:42 am
here today is -- what is the impact to interest deductions? as we look at this trend over the last 20 years, it has not had that big an impact. in my sense of things, it is changing business decisions. i am assuming that everyone on the panel here would say that someone to increase taxes and some would like revenue neutral but i have two questions -- are we clear that the deduction on interest is really not the right incentive as we move forward? if it were a revenue neutral situation, what would you do with those tax dollars in another way? would you reduce the corporate rate? would you eliminate the tax deduction and focus on the corporate rate? what we do with those dollars? -- what would you do with those
6:43 am
dollars? >> i think you have asked the broad question of how to undertake major tax reform. you could undertake tax reform and maintain deductibility of interest. you could undertake tax reform and create new preferences for equity. you could integrate corporate tax on the individual tax and change overall incentives. >> maybe i asked to many questions. should we keep the interest deduction in your opinion? if we did not have an interest deduction, would you advocate to put one in? >> by the advocate before the committee. i work for the committee. >> there are certainly good
6:44 am
arguments for limiting the interest deduction. you cannot limit the interest deduction without taking into account a ripple effect. the interest deduction of fa facts the decisions. the tax rules are the things that decide what people do. they have an impact and if we are going to limit interest deductions, we have to do it on a comprehensive basis. we have to think about transition and things like the comprehensive business income- tax set up a system that is more like the treatment of equities. you would not have a deduction for interest on the business side but on the purpose of -- but on the recipient side, it would not be taxable income. >> thank you. mr. kind is recognized. >> i want to thank you for the panel today.
6:45 am
i think this format is very helpful and it makes sense for us to have more joint hearings like this where we can better coordinate the action of the house and the senate especially over something as important and crucial as comprehensive tax reform. you have been an advocate for some time of tax in excess of leverage but you had netted earlier in the lehman brothers case and coming out of the financial crisis that was often difficult to be able to identify what excessive leverage looked like at the time. have we made improvements with the passage of dodd-frank or other steps coming out of the financial crisis of having a better ability of identifying excess of leverage when it exists as opposed to a record -- retrospective look back? >> the new york fed and the sec were living at lehman brothers in the last few months.
6:46 am
do we understand the risks that arise in this kind of leverage? do we know who will be impacted? we don't know. there is no determination on this. these risks are huge on the impact of the rest of the economy and they come from excess of leverage particularly in our biggest financial institutions. >> there are capital structures that are in place right now. we have not gotten into the transition period we should be considering but what kind of time. do you think we should be looking at as far as the transition pace of tax reform? >> that would be determined in part by the kind of change you make and whether it is incremental or whether it is
6:47 am
more comprehensive. even incremental change needs some transition period. >> this mainly has to do with debt and the incentives for increased debt and the tax code today. >> it depends on how radical you want to be. if the changes are incremental, they could be phased in more quickly but radical changes would take a longer time. >> benigno back to excess of leverage. it is difficult to determine how much leverage there is especially if think about off- balance sheet entities. he don't have to get it exactly right to make things better. the tax system is tilted to the wrong direction right now. any move towards neutrality is likely to make things much better rather than worse. >> i would echo the comments
6:48 am
that the scope of the transition has to bear the scope of change. you come -- you can imagine a marriage change which i would not support that could be done quickly. >> mr. reed is recognized. i guess i and the newest member to the committee so i get the last question. i enjoyed the testimony and i find it very informative from the panel today. i want to focus on a very limited area. one thing i hear as they go to my district from younger folks is that the college tuition that they are facing is going through the roof. i would be interested in any inside on providing subsidies through the tax code with student loan deductions, what impact if any do you see them
6:49 am
having with regard to tuition growth? would anyone like to -- >> you are raising an important issue. what kind of education are you getting for the money you are paying. ? questions are not being raised about the education sector and there are rules in place. if a high proportion of graduated students default on their loans, those universe is could not get those loans in the future. perhaps we should consider on a revenue neutral basis, shifting away from this low structure toward an alternative way. we could use some form of grants that are based on assessing people's means. >> any other comments?
6:50 am
is the tax code itself by allowing the deduction for student loan interest encouraging higher tuition costs because of -- because of the inflationary impact? is there any counterpoint? >> some people have raised that possibility that some of the benefit of the numerous provisions we have enacted to benefit education may react negatively toward education. the economic evidence could not be described as anything more than next. >> i would echo that. it has been very difficult to find this out. as to do with the fact that pricing in higher education is a very curious practice. we have seen increased list prices and loss of discounting. the all market structure -- a
6:51 am
whole market structure, the concern may be about the homogeneity. you have various different providers in the past providing different quality and that is worth looking at. >> . mr. crowley is recognized. >> the timing is everything. i am the last man on the totem. i appreciate you holding these -- this historic joint meeting on the house and the senate on an important issue of debt and the tax code. we should be talking about the overall issue of debt. the u.s. will have the so-called debt limit in three weeks which is like matching out a credit card. an individual with a credit card can stop making payments once they get their limit, the same cannot be said for the u.s. government.
6:52 am
spending that will be financed by debt limit increase deals with paying for past obligations, not future spending. we just cannot stop paying out social security group we cannot just stop a of veterans compensation and benefits. can i just stopped paying on military pay to our troops at war. if we do not increase the debt limit, that is exactly what will happen. funds that were promised in terms of social security where even the peoples of money will not be paid because we won't have the funds to do so -- can you imagine of social security checks bounce? that is a real possibility of congress continues to play games on the budget. the number 1 job of this congress to be to create jobs and get our fiscal house in order, not to play politics and about to special interest groups. president obama is extending his
6:53 am
hand and cooperation to work with congress to insure we can meet our obligations in paying out zero social security on august 3 and working for long- term debt reduction for our children and great- grandchildren. and reduction plan will require a shared sacrifice. sears also security and veterans' relying on theirva engines and troops in battle should not have to live their rightful benefits will others do not meet that same sacrifice. i will oppose a plan that does not involve shared sacrifice but makes seniors and veterans and military families pay the bills created after a decade of fiscal irresponsibility. it is amazing we have people in this room who support trillions in tax cuts and two unpaid for wars but it says it is up to veterans and the singers and troops that sacrifice more so that millionaires don't have to. this president is trying to work out returning our country to a
6:54 am
policy of fiscal discipline. last seen when president bill clinton was in office while ensuring we promote economic growth and stability. i urge all of us to focus on this critical mission and stop playing politics and the blame game. >> mr. paulson is recognized for three minutes. >> i want to compliment you for holding a hearing with the senator and laying the foundation, this big and important foundation for tax reform. i want to go back to the design of what the tax system should look like and what tax reform should look like if we're going to promote economic growth and jobs. that should be our number one goal here.
6:55 am
spending and debt are a big issue but we have to increase economic growth. we only have 18,000 jobs coming out of the last jobs report which is embarrassing when you think we have more college graduates in minnesota and jobs coming out nationally. we want a tax code that will promote work, savings, and investment. what should be the focus on that in the context of debt and equity? >> i think there is a lot of economic literature that supports the notion of moving in the direction of a consumption tax. there are ways to get there. a comprehensive tax law would be one way to move in that direction. >> i think the basic principles of what we are aiming for many of us agree that we need to read doris -- reduce the distortions
6:56 am
in the code that lead to not only a reduction in tax revenue but an incentive to engage in a wasteful tax planning. >> other and thought and helping small businesses? >> absolutely, the remarkable thing is the level of consensus what a good tax code would look like. is there a consensus on that? there's some notion of a consumption tax coupled with productivity that can be achieved in a variety of ways. sometimes that is not the hard part. there is consensus about what the tax code looks like but getting there is the harder part. >> i think he should focus on
6:57 am
moving toward a value-added tax system. you can generate the same revenue or less revenue or more revenue with the systems around the world. the u.s. system of taxing income will always get in the way of your goal if you want to promote work, savings, and investment. i would encourage you to look to the specific proposals put forward here as to how countries can move in transition smoother a tovat system. >> i want to thank our panelists this morning for being here and participating in the hearing. i want to think chairman baucas and the senate finance committee. this meeting is now adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]
6:58 am
6:59 am

tv
C-SPAN Weekend
CSPAN July 17, 2011 6:00am-7:00am EDT

News News/Business.

TOPIC FREQUENCY Us 9, U.s. 8, United States 5, Washington 2, Bill Clinton 1, Mr. Crowley 1, R. Berg 1, Benigno 1, Doris 1, Rabin 1, Mr. Paulson 1, Christie 1, Carper 1, Ms. Jenkins 1, Mr. Buchanan 1, Carl Levin 1, Mr. Reed 1, Mr. Johnson 1, Baucas 1, The Nation 1
Network CSPAN
Duration 01:00:00
Scanned in San Francisco, CA, USA
Source Comcast Cable
Tuner Channel 100 (651 MHz)
Video Codec mpeg2video
Audio Cocec ac3
Pixel width 704
Pixel height 480


disc Borrow a DVD of this show
info Stream Only
Uploaded by
TV Archive
on 7/17/2011
Views
113